As the race for a new premier heats up in Japan, we need to understand where individual candidates stand with respect to their stance on monetary policies. Reason being Japan might be the only country where politics has a significant influence on monetary policy making. We believe that the political uncertainty left by Prime Minister’s Kishida’s decision to step down will likely lead to a pause in both the Sep & Oct meeting of BOJ. But this will be a pause than a full stop. With BOJ to be on hold till Dec at least, carry trades might start flourishing again. We have already seen this playing out in this week. We now expect JPY to remain in the range of 145-155 till Dec.
